How the Collapse Will Play Out and How to Play For It

Phoenix Capital Research's picture

 As I’ve noted in recent missives to you, the world financial system has begun the Great Collapse: the Crisis I’ve been warning about for over two years. I wanted to take some time to explain what is going to be coming this way

The first wave is going to come from Europe where it is clear that the ECB has reached the End Game of monetary intervention. Germany has said “NEIN” regarding further bailouts for Greece. No German backing… no bailouts… no EU.

So Greece will default. And the bondholders will take a 50% haircut if not more. But Greece is the last of Europe’s worries. Indeed, there is a MUCH bigger problem here and that problem is the same one that created the 2008 disaster: DERIVATIVES.

US commercial banks have over $200 trillion in derivatives outstanding on their balance sheets. However, worldwide, the derivatives market is over $600 TRILLION in size. And the financial system in Europe is as saturated, if not MORE saturated with toxic debt than the US financial system.

According to the Bureau of International Settlements, the total exposure worldwide to PIGS (Portugal, Ireland, Greece, and Spain) debt is over $2.5 TRILLION. Most of this is in the form of derivatives. And 70% of it is from foreign entities (banks and firms located outside of the country).

Let’s take Greece for instance. Courtesy of derivatives, France has $92 billion in exposure to Greece debt. Germany is on the hook for $69 billion. Great Britain has $20 billion. And the US has $43 billion.

These levels, while dangerous, are not catastrophic. As I’ve stated before, Greece is NOT the big problem for the EU. However, worldwide exposure to Greek debt is in the ballpark of $277 billion. So a default there would result in significant market dislocations.

Now consider the exposure to a BIG Problem such as Spanish debt. In this situation, Great Britain is on the hook for $51 billion. The US is on the hook for $187 billion. France is on the hook for $224 billion. And Germany is on the hook for a whopping $244 billion.

As I said before, Greece is ultimately a small player in this mess. Worldwide exposure to Greek debt is $277 billion. Worldwide exposure to Spain, on the other hand, is north of $1 TRILLION.

Now this is where things get REALLY tricky. Because of the intertwined nature of the derivatives market, a Greek default could result in systemic risk for the simple fact that if one of the banks that goes down with Greece has extensive exposure to Spain as well, then things could get ugly very, VERY fast.

We are close DARN close to this happening. And when it does, we’re going to see a Crisis that makes 2008 look like a picnic.

If you have yet to prepare yourself for what’s coming, my Surviving a Crisis Four Times Worse Than 2008 report can show you how to turn the unfolding disaster into a time of gains and profits for any investor.

Within its nine pages I explain precisely how the Second Round of the Crisis will unfold, where it will hit hardest, and the best means of profiting from it (the very investments my clients used to make triple digit returns in 2008).

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Good Investing!

Graham Summers

PS. We also feature four other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s my proprietary Crash Indicator which has caught every crash in the last 25 years or the best most profitable strategy for individual investors looking to profit from the upcoming US Debt Default, my reports covers it.

And ALL of this is available for FREE under the OUR FREE REPORTS tab at: http://www.gainspainscapital.com.